BAGHDAD, Iraq  Iraqis were promised billions of dollars in mainly American aid to rebuild their country after last year's U.S.-led invasion, but mounting violence has choked reconstruction spending to almost nothing.

Security is so bad that authorities have been able to spend only 5 percent  just more than $1.5 billion  of the more than $30 billion promised by the United States and the world community for reconstruction and basic services.

Iraq was a key issue in the presidential election campaign, and although he won, President Bush, who called the war a success, was forced to defend his strategy against Sen. John Kerry.

Iraqi officials, who recently earmarked $15 billion from expected future oil sales for investment and rebuilding, admit most Iraqis have seen little benefit from the limited reconstruction possible so far.

"The priorities are sectors that would make a difference to ordinary Iraqis, such as security, basic services, infrastructure, and economic reform," said Planning Minister Mehdi al-Hafedh. "We want the Iraqi human being to rebuild himself. Not just in terms of life expectancy, health care, and wealth, but also education, respect for the human rights, and the environment."

After years of repression under Saddam Hussein and crushing U.N. sanctions, Iraq remains unstable and its people poor.

Almost 8 percent of children suffer malnutrition and about another 12 percent are underweight, a recent Planning Ministry study found.

The survey, which did not give pre-war figures, also said almost 40 percent of families do not have clean drinking water and the average family earned just 186,000 Iraqi dinars ($130) a month last year.

High Cost of Security

But the cycle of suicide bombings, air raids, kidnappings, and murders make progress slow, difficult, and dangerous.

The number of Iraqis employed on rebuilding projects, mostly as laborers, has fallen to 85,000 from well over 100,000 in the past few months, U.S. reconstruction officials say.

Many foreign contractors, facing the threat of kidnapping and beheading by Islamist militants, have rebased in Jordan or the United Arab Emirates, adding to delays.

Scores of foreign and Iraqi workers have been kidnapped and killed, several of them beheaded, by insurgents fighting the interim government and its U.S. backers and security now accounts for up to half the cost of some projects.

This diversion has angered some in Bush's own party.

"It's beyond pitiful, it's beyond embarrassing, it's now in the zone of dangerous," Nebraska Sen. Chuck Hagel, a member of the Senate foreign relations committee, said in September.

Money has also had to be diverted from reconstruction to equipping and training Iraq's fledgling new security forces to battle the well-armed guerrillas.

Iraqi officials say high turnover among the U.S. administrators and contractors has also been damaging.

"Delegation after delegation comes asking us what are our priorities are and we give them the same list," said one.

And corruption and bureaucracy are taking their toll, delaying the installation of new equipment and supplies in sorely overstretched public hospitals.

Some services are improving slowly, although electricity production is barely higher than before the war and power cuts are frequent, even in the capital.

"Hooking up a new generation to a system patched under sanctions is hard. Some procurement has also been misguided," said an Iraqi engineer working for a U.S. contractor.

Aside from $18.6 billion it has allocated for rebuilding Iraq, the United States has poured billions of dollars from other sources, including the army, into infrastructure projects.

U.S. officials say the spending will not transform Iraq overnight but is designed to build the minimum to encourage private investment and improve governance.

"We made a mistake. We did not do visible projects to gain trust quickly, such as paving roads," one official said.

But despite the painfully slow progress and the billions of dollars that remain unspent, some Iraqis are profiting handsomely from the limited reconstruction.

Ahmad Saleh, a 30-year-old contractor from the Sunni triangle at the heart of the insurgency, regularly collects bags of cash from the fortified Green zone in Baghdad as payment for subcontracting work and supplying generators.

Saleh, who is too afraid to use his real name, is a model of the Iraqis Washington hopes to win over to help build a free enterprise system and create work for Iraqi youth.

Barely able to make a living during Saddam's rule, he has already made hundreds of thousands of dollars and is now thinking big, seeking ties with regional companies to take on bigger projects.

"Iraqis are eager to jump at the opportunities and learn technology and know-how," said Saleh. "The so called resistance is hurting the national interest and extremism has been damaging to the economy."